Lawmakers in the US narrowly avoided a federal government shutdown last week with a compromise legislation that will allow the government to function till November 17. While the US Congress now has more time to settle differences, the recurring risk of government shutdowns owing to one reason or the other doesn't bode well, either for the US economy or global financial markets. Although interest payments and essential government functions are unlikely to be affected by a shutdown, investors may not want to ignore default risks for long, particularly because they could affect the basic functioning of markets globally. The frequent political brinkmanship on budgetary issues, in fact, reflects the underlying weakness in overall fiscal management.
Notably, while downgrading the US’ long-term